The year 2019 displayed mixed fortunes in as far as major macroeconomic indicators are concerned.
While some key economic variables remained stable, other fundamentals were swayed by volatility, weighing down economic growth prospects in the process.
To be specific, while variables such as interest rate, inflation rate and kwacha exchange rate were somehow stable, on one hand, fiscal deficit, investment levels, public debt and trade gap were somehow shaky to the detriment of the economy.
But generally, during the year, the economy displayed notable resilience despite the adverse effects of Cyclone Idai and the weak performance of tobacco exports.
Within single-digit inflation lane
The country continued to enjoy single digit inflation rate during the year, but the rate slipped into double digit in November. Suffice to highlight the fact that inflation rate has been anchored in single digit since August 2017 despite growing threats of run-away maize prices on the market.
Although the country recorded a maize surplus during the year, this did not help to soften food prices on the market. Maize production increased by 24.7 percent relative to the previous year, but prices rose by almost 60 percent in the period from June to August 2019.
As of end-September, maize prices were about 67 percent above the five-year average, according to the Malawi Vulnerability Assessment Committee (Mvac) report.
Maize is an important crop to the country, and as part of food, contributes about 45.2 percent to the Consumer Price Index (CPI), an aggregate basket for computing inflation by the National Statistical Office (NSO).
However, that during the course of the year, food inflation is was largely driven by maize prices and with the lean season intact, maize prices are set to continue to rise; hence, elevating further food inflation.
By contrast, non-food inflation has continued on a downward trend during the year, declining from 9.2 percent year-on-year in October 2018 to 4.3 percent in October 2019. Supported by a relatively stable kwacha exchange rate and prudent monetary policy, non-food inflation was lower in a number of sub-categories, including housing, water, and electricity (2.3 percent); communication (2.0 percent); and recreation and culture (3.0 percent), according to the World Bank’s latest edition of the Malawi Economic Monitor (MEM).
The Reserve Bank of Malawi 9RBM) expects inflation to average 9.3 percent in 2019 and thereafter trend downwards in 2021 as global oil prices rise and domestic demand strengthens, supported by strong credit growth.
Seamless exchange rate trajectory
Business captains could bear testimony that the local currency remained stable during the year, save for a few notable occasions.
After depreciating by about six percent relative to the dollar in the second quarter of 2019,